1. Consumerism UNIT IV

2. Disposable and Discretionary Income Consumer- a person or group who buys or uses goods and services to satisfy needs/want Disposable income- $ to spend or save after taxes have been paid. Discretionary Income- money to be spent after necessities have been bought What two things can a person do with discretionary income????

3. Decisions for Consumers Consumer decisions involve comparing available alternatives. You must consider: 1.Opportunity cost- value of the highest alternative choice that you did not make. 2.Rational Choice- choosing the alternative that has the greatest value from among comparable- quality products. 3.Scarce resources- income and time need to be considered; time is for researching a product.

4. Saving or Spending Individually: 1.List two things you spend money on regularly with discretionary income. 2.List two things you long term save for with discretionary Income. 3.Assess why you choose to spend money for certain things or save for certain things.

5. Consumer Journal In this project, you will learn the steps of making a major purchase, including researching and comparison pricing. You will create a consumer journal to document your research and conclusions. 1.DECIDING WHAT TO LOOK FOR: In groups you will make a list of features you would look for in making a major purchase.

6. Step 1 Instructions Individually choose one item you would save for out of: 1.Car 2.Hand held technology (i-pod, i-phone, smart phone, tablet, i-pad, etc.) 3.Technology system (computer, laptop, gaming system) 4.Educational (college, musical instrument, trade school) Come up with a list of features you consider before purchasing this make or model Write a description of each of the features’ importance Rank these features by importance

7. Consumer Journal Part 2 Step 2: GATHERING INFORMATION o You will look for information that will help find products with features that match the product features you wish for. Look for advertisements on the internet/magazines to find brands to research. Compare advertisements with your group. Rank products based on your feature list from step 1. Present your product advertisement and feature list to the class.

8. Consumer Rights Consumerism- movement to educate buyers about the purchases they make and to demand better and safer products from manufacturers. 1962 JFK outlined four major rights: 1.Right to safety 2.Right to be informed 3.Right to choose 4.Right to be heard 5.(added by Nixon) Right to redress- compensation for damages caused by products

9. Americans and Credit Credit- receipt of funds either directly or indirectly to buy goods and services in the present with the promise to pay them in the future. Principal- amount originally borrowed in the loan. Interest- amount the borrower must pay for the use of someone else’s funds Installment debt- type of loan repaid with equal payments or installments over a specific period of time. Durable goods- items with a life of more than 3 years. Mortgage- Installment debts owed on houses, buildings or land.

10. Why do people use credit? It allows consumers to enjoy something now rather than later. Checklist for buying on credit: 1.Do I really require this item? Can I wait? 2.If I pay cash, what am I giving up? 3.Is the satisfaction from the item worth the interest? 4.Have I done comparison shopping for credit? 5.Can I afford to use credit now?

11. Types of Financial Institution Commercial Bank- Main functions are to accept deposits, lend funds and transfer funds among banks, individuals and businesses. Savings and Loan- depository institution that accepts deposits and lends funds. Savings bank- depository institution originally set up to serve savers overlooked by commercial banks Credit Unions- owned and operated by its members to provide savings accounts and low interest loans to only their members Finance company- takes over contracts for installment debts from stores and adds a fee for collecting the debt

12. Charge accounts and credit cards Charge account- account for a particular store allowing consumers to buy on credit Credit card- charge purchases from anywhere to a company and pay them back plus interest Finance charge- cost of credit expressed monthly in dollars Annual percentage rate (APR)- cost of credit’s interest in yearly percentage amount.

13. Will you be able to get credit? Credit Bureau- private business that investigates a person to determine the risk involved in lending to that person. Credit check- investigation of a person’s income, current debts, personal life, and past borrowing and repaying history.  WHY WOULD A PERSON GET A BAD/GOOD CREDIT RATING? Credit rating- rating of the risk involved in lending to a person or business.  Can you name any companies that advertise this topic?  Explain why YOUR CREDIT SCORE MATTERS? Collateral- Something of value that a borrower lets a lender claim if loan is not repaid Secure loan- backed up by collateral Unsecure loan- guaranteed by a promise to repay it

14. Laws Protecting You “Truth in Lending Act” and “Equal Credit Opportunity Act” are a few of many laws protecting you and your ability to borrow $ Usury Law- law restricting the amount of interest that can be charged for credit. Bankruptcy- the state of legally having been declared unable to pay off debts owed with available income; remains on your credit for 10 years; should be a last resort.  WHEN WOULD YOU HAVE TO USE BANKRUPTCY?

15. GET OUT YOUR BOOK Open to page 111 Do numbers 23-25 & 29 in partners. #23 20 months #24 Interest charges add to the balance each month so it takes longer to pay #25 This is the total of interest charges over the 35 month period it took to pay off the debt; cost of borrowing the money #29 A.The interest almost is 2X as high as regular B.Try to attract new customers C.Card B D.Under most circumstances, card A would be the best but depends Average balance; if the balance was $5,000 card B would be better